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A blockholder is an investor who owns a significant portion of a company’s available stock or bonds. These shareholders own enough of the business to be granted voting privileges for issues such as deciding membership of the board of directors. As a blockholder can hold as little as five percent of available shares, it is common for one company to have several blockholders.
The influence of a blockholder on a company depends on several factors. Those who hold the highest percentage of the business often have the most influence, primarily due to their voting power. Depending on the characteristics of a blockholder, one with a smaller share may exert influence on blockholders with more shares. The influence blockholders have on a company also depends on how long they own that block of stock. If they don’t hold it for long, they are not likely to have much of an impact on the company.
Many analysts and other industry experts are wary of the control exerted by blockholders. As the size of a company increases to the point where it can accommodate this kind of ownership, control of the business can be shifted away from its managers. While the input of a blockholder can be beneficial, it is also believed that it can put a company in peril. Many of the people with this view also believe that smaller businesses tend to be more effective because they don’t allow for the significant amount of intervention found with blockholders.
A blockholder who is not an employee or owner of the business has an unusual position in a company. This shareholder has access to more information than those with fewer shares, but typically does not have the comprehensive knowledge of those with daily involvement in the business. In some cases, this outside perspective, and the added incentive of having a significant stake in the business, can make the blockholder’s input valuable. Whether a blockholder’s involvement is negative or positive depends upon the subject at hand, the experience of the investor, and the nature of the relationship with the company.
Blockholders who are also executives, partners, or otherwise employed by the company can help to keep a business within the control of individuals who know it intimately. These shareholders have the double responsibility of working in the business and increasing its value for their own benefit and that of shareholders who are external to the company. Depending on the amount of shares owned and the practices of these internal blockholders, the situation can be beneficial or oppressive for a business.